House Majority Leader talks tax reform in San Diego

Cantor visits Qualcomm Monday, talks Republican agenda

U.S. House Majority Leader Eric Cantor called credit rating agency Standard & Poor’s negative outlook for U.S. government debt “an alarm” for policy makers in an appearance in San Diego on Monday.

“It’s a wake up call for folks in Washington to understand that global investors are not messing around,” he said. “They are looking for us to do the right things to get our fiscal house in order.”

Cantor, R-Virginia, spoke at San Diego wireless giant Qualcomm, emphasizing tax reform, innovation and the Republican agenda for the economy.

The speech touched on political issues important to Qualcomm, including a tax holiday for offshore profits. It also called for steps to ease the patent application backlog.

The upcoming vote on raising the U.S. debt ceiling is where House Republicans most likely will push their economic agenda. President Obama has called for an straight up or down vote on the raising the debt ceiling without amendments.

Asked if he agreed that the debt ceiling must be raised, Cantor said Americans expect the U.S. government to pay its bills. But he added that there’s more involved.

“We’ve got to demonstrate that we’re not going to do things the same way,” he said. “I would suggest that perhaps the credit markets would look at a clean, up-or-down vote on the limit as negatively as they would perhaps if they United States didn’t raise the debt limit.”

Cantor supports the Republican plan to cut the U.S. corporate tax rate from 35 percent to 25 percent, with elimination of tax breaks to make up for the revenue shortfall. President Obama said last week he also wants to do away with tax breaks to lower rates and to reduce government borrowing.

Many U.S. multinational companies, however, pay less than 25 percent in income taxes today. Qualcomm, for example, paid 20 percent during its 2010 fiscal year. That’s partly because the U.S. does not tax income from foreign subsidiaries of U.S. based companies as long as the profits remain offshore. Qualcomm has $13 billion in offshore cash.

If overall tax reform isn’t achieved in the short run, Cantor said he supports the tax holiday for offshore cash, which is known as repatriation.

“Repatriation — the need for it — is symptomatic of our broken tax code,” he said. “If the concern right now is to increase capital formation and investment in America, why is it that we would turn away from trying to pull back $1.25 trillion in overseas profits. As someone said, it’s money you don’t have to print. Why not bring it back, allow it to be invested in our economy, rather than what’s happening now, which is it’s invested abroad.”